The big guys try to write their own bonanza
By Steve Lilienthal
web posted November 17, 2003
Letters were placed in the mailbox earlier this month addressed
to two important legislators notifying them that over twenty
Members of Congress are concerned about a provision in the
Senate version of the faith-based initiative. If you are a private
property owner, then you have good reason to be concerned
about what is coming to be known as the Land Trust Tax
Favoritism proposal.
Among the signers are recognizable conservative legislators such
as Wally Herger (R-CA) and Richard Pombo (R-CA) who
would probably be whole-hearted supporters of the faith-based
tax proposal if not for this attempt to wrangle a special deal.
Their letter cites their significant concern about the Senate's
version of the faith-based initiative because it cuts the deck in
favor of land trusts and government agencies at the expense of
the average property owner.
Here's what has happened.
Large land trusts and their influential allies in Washington's
political establishment have pushed for the inclusion of a
significant tax break in their favor when privately owned land is
being sold. The House version -- H.R. 7 -- the Charitable Giving
Act -- does not include the special break, but the Senate version
-- S. 476 -- the CARE Act of 2003 -- does.
If the Senate version is included in the bill that will be sent to
President Bush's desk, a capital gains tax reduction of 25 per
cent will be provided to sellers of land or water rights only if they
sell to large land trusts or government agencies.
Therefore, without this tax break, the seller of a parcel of land
valued at $500,000 would put his land on the market and
receive offers for land at that price. If this provision takes effect,
the average buyer would end up paying $500,000 and the
property owner selling the land would have to pay taxes on the
transaction. With the provision, however, he receives a 25 per
cent capital gains tax reduction on the $500,000 transaction
provided that he sells to a land trust or government agency even
though they do not perform charitable acts.
Even if he wants to sell to the local church or just to a friend, if
the Land Trust Tax Favoritism proposal is passed, the deck will
be stacked in favor of selling to the Big Land Trust or the
agencies of the Federal government.
When the congressional Joint Committee on Taxation examined
the impact of the land trust provision in its May 12th analysis of
the CARE bill, its analysis determined that the provision would
reduce revenue for the federal government by hundreds of
millions of dollars over a ten year period.
This provision draws opposition from Members of Congress in
Western states given that the Federal government already owns
36 per cent of the land and this can only lead to taking more land
off the property tax rolls. The result of this provision, should it be
enacted, is likely to lead to further hikes in property taxes to
compensate for the resulting attrition of taxable land or
reductions in public services. As the letter signed by the
Members of Congress makes clear the impact of this provision
may very well be felt throughout our agricultural sector: "The
Senate provision places a premium on selling farms and ranches
to non-farm organizations, thereby discouraging our young
people from entering into agriculture and reducing competition
for land. With reduced competition for property, the landowner
loses."
But the opponents of the Senate provision also find fault with it
for cutting the deck in favor of a large land trust like the Nature
Conservancy with its $3.2 billion in assets and an annual budget
of $740 million. Dealt out of the deal are the very faith-based
institutions that are supposed to be helped by the faith-based
initiative -- churches, orphanages, and
religious schools.
Machinations by Senate Minority Leader Tom Daschle (D-SD)
have held up negotiations over the reconciliation of the language
in the two bills.
Representative Wally Herger (R-CA) explains why he does not
believe the Land Trust provision should be in the final version of
the faith-based bill: "It defies reason that Congress would make it
easier for the government and radical environmentalists to lock
away even more land. Private property encroachment and
resources neglect is the poor record that stands against these
types of ill-conceived incentives. This provision is exactly
contrary to the purpose of the bill itself, namely to benefit
nonprofit faith-based groups like schools and charities."
From the standpoint of protecting constitutional liberties --which
includes the right of property owners -- the Land Trust Tax
Favoritism proposal sets a disturbing precedent.
If this were the "Big Land Trust Tax Favoritism Act" then it
would be an accurately labeled piece of legislation, not a special
break being piggybacked on legislation to help institutions and
group that are supposed to be the charitable equivalent of the
mom and pop store.
When a bill supposed to help the little guy becomes a giveaway
to the big boys, someone should blow the whistle!
Fortunately, it's been spotted, the whistle has been blown, but
will the public outcry be enough to stop it?
That's a question worth asking and the wrong answer could end
up costing taxpayers hundreds of millions dollars.
Steve Lilienthal is director of the Center for Privacy and
Technology Policy (www.freecongress.org).
Enter Stage Right -- http://www.enterstageright.com